James Latham starts second half 'slightly weaker'

1st Dec 2022 10:51

(Sharecast News) - Timer, panel and decorative surface supplier James Latham reported a 9.7% rise in revenue in its first half on Thursday, to £212.8m.

The AIM-traded company said cost prices on both timber and panels had risen at a "much slower rate" than last year, but were remaining stable with few signs of price weakness.

Volumes in the six months ended 30 September remained at similar levels year-on-year, the firm said, despite a weaker economy.

Operating profit fell £10.6m to come in at £23.5m for the period, as a result of margins returning to expected levels, although it was still a "significant improvement" on historic levels of operating profit as exceptional trading conditions began to normalise.

Profit before tax slid to £23.7m, from £34m year-on-year, while earnings per ordinary share totalled 95.6p, down from 133.5p in the same period last year.

As at 30 September, James Latham said its net assets totalled £180.5m, up from £146.4m.

Its board said inventory levels of £74.6m had "stabilised", with supply issues still requiring the firm to hold a higher volume of inventory.

Trade and other receivables were also similar to the start of the financial year, with bad debts remaining at a low figure.

Cash and cash equivalents improved to £36.9m from £24.5m, which the directors said was "important" to allow the company to maintain investment in working capital - particularly in inventory levels.

The company was continuing to take advantage of additional early settlement discount opportunities with its suppliers.

James Latham said the calculation of its pension deficit was still sensitive to changes in assumptions, with the increase in corporate bond yields resulting in a surplus as at 30 September of £7.3m compared with a deficit of £12,000 in the same period last year.

That, the directors said, was allowing the company to undertake a de-risking exercise to reduce the volatility of the calculation.

The board declared an increased interim dividend of 7.25p per share, up from 6.5p a year earlier, payable on 27 January to shareholders on the register at the end of day on 30 December.

"The second half has started with slightly weaker volumes than the previous six months, with margins also slightly lower than in the same period," said chairman Nick Latham.

"The supply chain has become easier over the past six months, with fewer extended lead times on our products.

"Cost prices of the majority of our products are stable at the moment, but there are still uncertainties as to the effect of energy costs and other inflationary pressures on the overheads for our key manufacturers."

Latham said recent drops in container rates had affected the cost prices for products shipped via container, but they had been "artificially high" since the beginning of the Covid-19 pandemic, with the company expecting them to come down to more normal rates.

"There are a few market sectors, such as the merchant sector, that are quieter at the moment, but many of our other customers have steady order books and remain busy, but are clearly nervous looking at the macroeconomic conditions next year.

"I am pleased to report that the Yate extension is now completed, and this extra capacity will allow us to grow our market share in the south west of the UK."

The board recently approved a racking investment at IJK in Northern Ireland, Nick Latham added, which would enable it to extend its product range and develop sales.

"We are continuing to increase the working hours at our depots with Purfleet becoming the latest site to be working 24/5 from the beginning of October."

At 1013 GMT, shares in James Latham were down 6.41% at 1,212p.

Reporting by Josh White for Sharecast.com.